02262cam a22002657 4500001000700000003000500007005001700012008004100029100002600070245016500096260006600261490004200327500001400369520113700383530006101520538007201581538003601653690007001689700001901759700002401778710004201802830007701844856003801921856003701959w13074NBER20170818013455.0170818s2007 mau||||fs|||| 000 0 eng d1 aCurcuru, Stephanie E.14aThe Stability of Large External Imbalancesh[electronic resource]:bThe Role of Returns Differentials /cStephanie E. Curcuru, Tomas Dvorak, Francis E. Warnock. aCambridge, Mass.bNational Bureau of Economic Researchc2007.1 aNBER working paper seriesvno. w13074 aMay 2007.3 aWere the U.S. to persistently earn substantially more on its foreign investments ("U.S. claims") than foreigners earn on their U.S. investments ("U.S. liabilities"), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases. However, utilizing data on the actual foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential of U.S. claims over U.S. liabilities is essentially zero. Ending our sample in 2005, the differential is positive, whereas through 2004 it is negative; in both cases the differential is statistically indecipherable from zero. Moreover, were it not for the poor timing of investors from developed countries, who tend to shift their U.S. portfolios toward (or away from) equities prior to the subsequent underperformance (or strong performance) of equities, the returns differential would be even lower. Thus, in the context of equity and bond portfolios we find no evidence that the U.S. can count on earning more on its claims than it pays on its liabilities. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aF3 - International Finance2Journal of Economic Literature class.1 aDvorak, Tomas.1 aWarnock, Francis E.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w13074.4 uhttp://www.nber.org/papers/w1307441uhttp://dx.doi.org/10.3386/w13074